Vertu Motors plc (VTU) Earnings Call Transcript & Summary

Good morning. My name is Robert Forrester. I'm the Chief Executive of Vertu Motors, and I'm joined by our Chief Financial Officer, Karen Anderson, to present our financial results for the 6 months ended 31 August 2020. It was actually a very successful first half, beyond any expectations that we could have hoped for when we got locked down by the government on the 23rd of March. The business has actually made massive progress and, I think, taking full advantage of the tailwinds, which the U.K. automotive retail sectors had since lockdown, which has come back very, very strongly. We had a strong business before in terms of the fundamentals, but I think we've improved it in H1 to give ourselves a stronger business now. And if you look at the performance, we generated profit, which certainly wasn't my expectation in -- at the end of March. We've actually generated in September, a record profit in terms of the month in the history of the group in terms of September or March, the highest in our history. I think we've got a stronger culture within the business. We went very much into significant communication by video during the lockdown and subsequently. And I think that's helped to galvanize the fighting spirit and the bounce back. We've got a very strong balance sheet. We've always had a strong balance sheet. We have net tangible assets of GBP 165 million, and that gives us a great platform. And actually, the financial stability and strength of the business meant that while the executive management were focused on cash, we were also focused on how we could maximize the opportunity presented by the pandemic, rather than worry about existential threats. And as part of that, we launched a plethora of new technologies, both around omnichannel retailing and, indeed, giving us greater efficiency and productivity. So we think we're well positioned for future growth. We will be mindful in terms of our capital allocation approach to make sure that any acquisitions that we do meet relevant hurdle rates. And we remain hopeful as a Board that we'll be able to reinstate the dividend in the next financial year, obviously, subject to financial performance. So unusually, if you turn over to slide, 2, you can see that the financial period really was best broken down into 2 quarters. There were actually 3 distinct periods. Quarter 1 actually fell into 2 distinct periods for me. If we take quarter 1, you can see we actually lost money, GBP 14.3 million loss against the GBP 13 million profit in the prior year. And given that has our normally highest profit month of margin does take some believing when you read it. The first period to talk about is the period up to 23rd of March when we had our March peak trading month. But clearly, that got impacted by the prospective lockdown and the loss of consumer activity. And then clearly, in the last week, we were actually locked down. However, March was a profitable month, albeit at lower levels than normal, as we previously disclosed. The period from the 24th of March to 1st of June saw all our sales showrooms closed across the U.K. They came back at different times depending on jurisdictions. There was a progressive relaxation in England towards the latter part of that period. But we think we opened the business during the lockdown more than the competition. We opened 98 service departments within 3 days of Boris' lockdown announcement, because clearly, they were essential to the national effort. Our centralized contact centers did fantastic work in terms of answering the phones centrally, also in terms of handling sales inquiries even though our showrooms were closed, and our aftersales contact centers, booking those key workers and essential businesses into our service departments to keep people on the road. We also had the vast majority of our general managers still in the business in the showrooms making sure that costs were minimized, that sales were maximized despite the constraints and that the aftersales environment was safe both for colleagues and for customers. Clearly, in the period, the business has benefited, as you can see on the slide, from considerable government support, particularly in Q1 and around the job retention grant, but also rates relief, which will carry on until the end of March next year. Turning to Q2. The industry rebound is far quicker than anybody could have imagined. Certainly, my expectations were nowhere near the bounce back that we saw. Demand came back quickly, particularly, actually, in used cars and service. The consumer has sat at home, vast majority being paid and couldn't spend money, so they generated cash. And their options to spend money has been heavily curtailed. They really couldn't go on holiday abroad. They couldn't really, in much of a mood to go out, when they did go out because the government paid 50% of their restaurant bills. So the cash has gone, I think, in the economy into 2 major areas. One is buying cars and two is home improvements and we clearly benefited from that. We've also seen very strong relative demand in terms of vans as more and more people have entered the courier market to do home deliveries. And service saw pent-up demand. I actually don't think we're seen pent-up demand so much in sales. But certainly, in service, we have. People want their car serviced, and we were closed or significantly closed or lower capacity for a couple of months. So we've seen the benefit of that. We also saw supply constrained in terms of new and used cars, and that's augmented margins, and you can see that in the financial results for Q2. A significant margin expansion. Our online businesses, which sometimes get forgotten, such as our online van selling business, Vans Direct in South Wales, and our online parts retailing business in Kent for base parts, they went through the lockdown pretty unscathed. And, in fact, in a number of months, actually grew year-on-year and gave us a profit stream, which was very, very useful. And they continue to be performing well ahead of our expectations. If we turn over to Slide 3. We're a great believer in our business actually that culture eats strategy for breakfast and getting the culture right within the business is of paramount importance. Making sure that people feel included, that they understand what's going on, that they understand what's expected. And we felt, as we went into lockdown, that our 5,500, 6,000 colleagues will be nervous as to what it meant for their lives, what it meant for their families and what it meant for their jobs. So we did a number of things. We financially supported colleagues in the group in excess of the monies we received from the government. The Board felt that was absolutely the right thing to do. So in general, everyone got paid 80% of average earnings. Our senior management took significant pay cuts during the lockdown, and we thought it was right to give the message that we were all in this together. We then commenced an almost continuous process of video blogs to colleagues using their private e-mail addresses to keep them informed as to what was happening in the business, but also keeping them informed of what was happening in terms of people's lives generally. We encourage volunteering. And we have some great new stories to try and keep the spirits up. And that kind of communication significantly helped us as we came out because people felt they knew what was happening and weren't sat there just worrying about it. As we came out of lockdown, we actually decided to come up with 2 short-term visions and plans, which we communicated via physical meetings or indeed, via videos to the -- all the population of colleagues to make sure they knew what was required, which supported people during the lockdown. And they wanted to come back quickly, and they wanted to do their bit to rebuild the group. So in May to July, you can see in the middle there, 3 months plan to reenergize. This focused on clearly keeping customers and colleagues safe, working together to maximize the group benefit, make sure we all work together with the greater good to balance the capacity, which we needed to bring back into the business while being mindful of consumer demand. And we brought the capacity back gradually, but probably quicker than most groups, I suspect. We have an absolute focus on costs and an absolute focus on cash, and everyone in the group knew the targets that we set, and we delivered those targets, and we delivered them in advance of where we thought we were going to be. And really, it was a question of management leading from the front. Our general managers actually were positioned on the front door of the dealerships so they could talk to customers, make sure their expectations as per social distance in place, taking the temperatures of all colleagues every morning, which we're still doing to make sure we have as safe an environment as possible. We had a successful time with that. And then August and September, when the market was clearly strong, we sought to maximize the opportunity and launched another plan around speed, simplicity and confidence, and got the basics and the disciplines back in the business. We've been running very tight, and we're now, I'm pleased to say, back to normality in terms of operations of the group. Turning to Slide 4. This is reiteration of the group strategy. The group strategy has not changed with regards to COVID. It remains highly relevant. We reviewed it as a Board and came to the conclusion that the trends that we felt we needed to be cognizant of we're merely accelerating rather than changing. And I think that's absolutely the case. And the key themes are scale. We fundamentally believe, to be successful in motor retail, we need our scale, our brands and operation. You need to invest in technology, technology to deliver omnichannel retailing, but also significant enhancements in productivity across the business to make sure that everyone is adding the maximum out of value-using technology. But also a focus on people because, yes, technology is slightly important, but it's still a people business. And delivering success in our business is absolutely down to having the right people in the right jobs in our dealerships, and to deliver to for customers, because customers still want to deal with people. Our mission statement is to deliver an outstanding customer motoring experience through honesty and trust. That takes people to do, clearly backed up by great technology and have a business with strong ethics and strong core values, which I think we have exhibited across the business in the past few months. If we take on Slide 5, a look further at scale and brand. Scale delivers a number of benefits in automotive retail for me. It allows you to apply technology, which you've invested in across a larger number of outlets. It allows you to drive scale benefits and cost reductions. It also gives brand synergies in terms of having big brands where you add more outlets, you're effectively spreading your marketing costs and giving you more marketing power. And also to make sure that we are working close with manufacturer partners with meaningful scale of partnerships and allowing us to have dedicated franchise management who are absolutely specializing in that manufacturer because all the manufacturers we deal with are different in terms of how they operate the franchises, and we need to be very closely aligned to those manufacturers. So we are growing the group. You can see that we bought a Kia dealership in Nottingham last week. We've now added 3 Kia dealerships in the last 9 months, having not represented Kia. It was a hole in our portfolio, which we are now plugging. And it allows us to have some scale in that relationship. We're also continuing to follow a strategy, which we've been fighting for a number of years of multi-franchising a significant number of dealerships. This maximizes both throughput of new car sales, but also throughput of aftersales and we're seeking to future-proof the business by multi-franchising where we think that is appropriate. You can see here that the strategy is around having a bricks and clicks strategy, having great online capability and superb off-line facilities and processes. And we have 4 key brands. And I think that marketing has increasingly become a core of what we do in the business, increasing the spending time on marketing, got a fully resourced marketing function, which worked tirelessly through the lockdown in terms of customer perception and communication. And we actually kept our marketing going significantly on TV during the lockdown, which I think significantly helped the group as we came out. So we aim to build very strong brands. The Bristol Street Motors brand is ranked #2 in the U.K. in terms of prompted awareness. 53% of U.K. subjects are aware of Bristol Street Motors. We would aim for that to be the biggest brand in the U.K. within the next couple of years. And I think we can achieve that despite the fact it only represents English volume brands and we've got 77 outlets at the moment. We have a different brand in Scotland, Macklin Motors. That's actually got 75% prompted awareness in Scotland, a significant amount of awareness because we've been promoting it heavily on TV. We're now growing the number of outlets in Scotland. And both Bristol Street Motors and Macklin have sponsored the Channel 4 coverage of Formula One over the past 4 or 5 months, which has helped lift brand awareness as well as Bristol Street Motors sponsoring the PFA Player of the Month in terms of football. So we are growing these brands, and that helps us to generate inquiries, traffic and promote the substantial website assets that we have. The Farnell brand is a premium brand for Jaguar and Land Rover in the north of England, and it is very well developed and is a fabulous business. And then finally, we've got the Vertu Motors brand. Now Vertu Motors now has 37 premium outlets in the U.K. We actually have relaunched our vertumotors.com website, which this time last year was an investor website for the plc, but it's now a retail website for the Vertu Motors brand with online retailing capability. And we're launching now over the last few months that Vertu brand to get greater brand awareness. So for example, we sponsored some Channel 4 correlated programs and bits instigated TV campaigns to drive traffic to vertumotors.com. Digitalization is clearly a big subject. It falls into 2 categories for us. One is changing customer journeys and the development of omnichannel retailing and the second is digitalization increasing productivity. Karen is going to deal with the digitalization through increasing productivity, and I'll deal with the changing customer journeys. It's fair to say that COVID has accelerated some of the existing trends that we were seeing. Clearly, actually during the lockdown, customers were forced into a nondealership-based process. And we sold lots of cars without a traditional test drive and purely over the phone or indeed the Internet. It's not actually what customers want. Customers actually do want to come into a dealership and test drive cars for the vast, vast majority of the time. And as we then opened the showrooms, and we opened first 1st of June in terms of England and then 1st of July in terms of Scotland, we have seen a slight change in customer behavior. So we classify inquiries in sales in 4 items: internet inquiries; phone inquiries; walk-ins; and where we've made an appointment from our database. A walk-in is where somebody walks into a dealership without having previously contacted us. And we've seen that decline -- not massively, but has declined as people ring up in advance or contact us by the Internet to actually make an appointment or to try and secure the car. Actually, we're seeing that effect of declining walk-ins back. It's less pronounced actually than it was a few months ago. Dealership visit have not diminished in any degree of iota. This is definitely bricks and clicks because people want to actually touch and feel the product in the vast majority of cases. We put a lot of major innovation into the sales process, and some of this affects how the dealership experience and some of that affects what happens on the web. But actually, in reality, the aim of the exercise is to make sure that the processes are absolutely identical, whether it's sitting on your sofa or sitting in a dealership, apart from the fact you clearly can't test drive a car from your sofa. So the major innovations that we've put in place, we can now sit in a showroom and screen share via our showroom system to a customer sitting at home so they can actually look at the deal, look at product presentations, et cetera. We can add video appointments where we can actually talk live, face time test via our showroom system. In August, we launched Reserve It Now, where customers can take a car off sale automatically on the Internet by paying a GBP 99 reservation fee that, that's off sale for 48 hours while we conclude the deal. That significantly increased productivity within our sales teams and 1,000 customers have taken advantage of that since the 1st of August. Similarly, booking appointments online, where we can actually guarantee that appointments will be kept and customers can go on, and we've got over 1,800 people since the 1st of August book an appointment online. And that's part of effectively, in the customer's mind, making sure that it's part of their safety, that we know they're coming, that we've managed social distance far better. The final thing, which is not technological, but shows you how COVID has changed what we do and the flexibility that we've employed as now we do on a company test ride. So the customer is in the car on the test drive, and our sales executives are not in the car with them. That is pretty revolutionary in the thinking of U.K. motor retail. And I think it's increased productivity because when the customer is actually out with test drive, our sales execs can be preparing everything for when the customer gets back. And it speeds up the sales process quite significantly. We do have more developments in the pipeline as our software development teams expanded this and is generating a lot of very good items. I'll now pass over to Karen to talk about productivity.

Okay. Thank you, Robert. And our ultimate aim really has to be to grow gross profits whilst actually reducing costs so that we get the least cost transactional -- the least cost per transaction as we possibly can, using automation and increased systems integration. So a couple of examples of this, the increasing use of online service bookings, where we've seen 15% of all of our service bookings now made online. And actually, we've made more progress now in terms of robotics, helping to translate those service bookings online to straight into service diaries, which reduces the need for intervention here in the contact center. The other area where we've increased integration is in vehicle admin. So what used to be a relatively paper-based process with a lot of human intervention has now transformed itself. On the bottom right-hand side of the slide, you see something or a snapshot of something called our delivery dashboard. This makes electronic all our electronic deal files or all deal files for vehicles. And it shows at a glance what's missing from the deal file, what work needs to be done and, more importantly, how we can prioritize our actions for which deliveries are going out first. The other thing it does is moving electronically. We don't have any physical paper anymore to pass between administration and sales team, meaning our sales teams or our administration teams can work remote from each other, which is essential. This has allowed us to reduce headcount in the key area of vehicle administration, which is part of our overall cost reduction. We're actually developing this even further to take more work out per vehicle admin. For example, we're going to be using robotic processes to tax and register cars with DVLA, including payment of those cars, and also using the -- using robotics to invoice vehicles off such as invoice -- vehicles and trade at BCA. So it's a great bit of use of technology that's allowed us to reduce that transactional cost and going to continue. If I turn over to Slide 7, this sets out the financial highlights for the 6-month period. As already mentioned, the first half of the year or the first quarter of the half was dominated by the impact of lockdown, and then we saw strong performance in the second quarter. Overall, we delivered an adjusted profit before tax of GBP 4.7 million, which was much better than we could have hoped for back in May. We haven't classified any items as exceptional because, quite frankly, it was hard to draw the line in particular in quarter 1 between what was exceptional and what was normal. Government support within the figure was substantial, totaling GBP 27.2 million in the period in respect of the furlough scheme. In addition, we received rates release on the group's dealership. Included in the results is the cost of our restructuring program, which was about GBP 800,000, and this will generate cost savings of GBP 10 million on an annualized basis going forward. The results also includes a small profit on the disposal of the surplus property as well as the cost of PPE to enable our dealerships to open safely. One area where I've been delighted with the group's performance has been in cash generation. And we generated significant amounts of cash during the period, ending with a net cash balance of GBP 36.5 million and with substantial liquidity. And that figure, including our use of used vehicle stocking loans. Our bank covenants were waived in the first half of the year, but actually, the group has operated within those original covenants from quarter 2 and projects that it should continue to do so. Despite this, we've actually sought the reset of the covenants for the second half to reestablish the previous levels of headroom we enjoyed. If I turn over to Slide 8, there's more detail on the financial performance for the 6-month period. Clearly, the impact of lockdown on turnover and gross profit can be seen on this slide, but the mix of overall sales has actually caused us an increase in the period in terms of gross margin percentage. Another area where we've seen cost increase has been in finance costs, and there's an analysis on the right-hand side of the slide. The biggest movement has been in manufacture of stocking charges on new vehicles. The lockdown saw no growth in the pipeline as factories also closed down. But actually, what happened is with no sales, cars in the pipeline started to age and small cars bore interest. Manufacturers also helped the dealer network through delay in adoption of new cars, which again, caused the growth in overall interest-bearing stock. On average, the new car stock levels were GBP 80 million higher in Q1 than in the previous quarter. This drove up overall interest costs, despite actually some of our manufacturers reducing interest rates to us to also assist during quarter 1. Another area where we've seen an increase is in tax in terms of our effective tax rate. The government enacted -- government reversed the previous decision to reduce the headline rate of corporation tax to 17%. And as such, our deferred tax balances have been revalued at 19%, which has had a one-off impact on our effective tax rate. If I turn over to the balance sheet on Slide 9, the group has arguably the strongest balance sheet of the quoted mix retail sector. We have net tangible assets of GBP 164.6 million and tangible net assets per share of approximately 47p. We have a pension scheme in surplus, both on the accounting basis and it's fully funded on the actuarial basis, and we have low levels of gearing. This provides the group with resilience as well as the firepower to invest in growth. Turning to cash flow. There's been some big news in parts, and that's on Slide 10. We generated a substantial free cash flow in the period. Now this is not because the group delayed any payments to creditors. In actual fact, we were up to date on all creditor payments, including rent on property and all taxes. We saw a significant cash inflow from a reduction in working capital. A big chunk of this, $27.1 million came from a targeted reduction in used vehicle inventory and demonstrators. And given our low use of new vehicle stocking funding, this flows to cash. A GBP 9.1 million reduction in fully paid inventory was also seen as the year-end peak position on this stock unwound. A reduction in parts inventory was aided by the changes in Voxel part distribution as previously flagged. And receivables actually increased as a result of the significant trading activity we saw in the period. The biggest number, however, in terms of -- is in terms of VAT. The significant sales rate in quarter 2 has meant that actually, we've seen a payable buildup of GBP 35 million, and this compares to about a receivable of GBP 10 million at the end of February. As I said before, this is not a reflection of those delaying payments of VAT, it merely relates to the quarter performance. If I turn over to Slide 11, this sets out the group's cash and borrowing position. The funding arrangements of the group are perhaps a little different from some of the other quoted players and this is worthy of note. Typically, I believe the groups have a revolving credit line, which covers for both acquisitions and working capital, whereas we split these facilities. We have a 5-year acquisition facility with a GBP 62 million limit and a further GBP 50 million uncommitted accordion facility available to us on this line. The group's working capital funding needs are met by a significant committed money market loan facility, the limit of which flexes in line with our normal seasonal peaks and working capital absorption which are the months following each calendar quarter end. This gives us plenty of liquidity. Additional working capital is funded through the use of a used vehicle stocking line. This is not uncommon in the industry, but what is uncommon is the fact that we treat this as actual debt and is not within trade payables. You can see that we use these facilities quite selectively. And at the moment, they're down as low as GBP 12.7 million against the stock value of over GBP 100 million. In addition, the group also gets funding from its manufacturer partners in respect of its new vehicle stock, and this is actually included in trade payables. That clearly can bear interest as we've seen on the profit and loss slide. Finally for me, turning over to Slide 12, which sets out the profit bridge split between quarter 1 and quarter 2. And you clearly see, the significant swing in the success of the group in quarter 1, driven by the lockdown, being at GBP 27.4 million swing in profitability. The bounce back in quarter 2 is evidence, where we've generated GBP 15.2 million more profit than we did in the same period in the prior year. We see that new -- within quarter 2, we see that new and fleet profitability is down. And this is due to some quarterly bonus, which Robert will go into in more detail. Used car performance saw a very strong performance, as did asset sales. Good cost control was exhibited, and we saw a positive contribution from our acquisitions. I'll hand back to Robert now who's going to go in more detail on the departmental performance in Q2.

So I'm going to start on Slide 13, which I apologize is a busy slide, but it's important to see how the profit/loss count looked quarter-by-quarter year-on-year. The first thing to say is, in quarter 1, we saw revenues down 64% as the lockdown is evident, but it was offset by cost savings and indeed government support, which is outlined on the schedule. The gross profit falls in quarter 1 are interesting. Used car gross profit was actually down 72%, whilst new car gross profit was only down 40%, and that's due to the fact that used cars are strong in all 3 months, whereas clearly, new cars are much stronger at quarter ends in terms of gross profit generation as you get your volume bonuses. So March actually delivered. And then there's less profitability normally in April and May. So it's actually quite interesting when you see that. We have, in quarter 2, seen lower gross profit in new and fleet, as Karen outlined, and that is due to volume bonuses, which are accounted for on a quarterly basis. So in June, the volume bonuses we received on new vehicle sales from manufacturers was lower. They reduced the targets, but they were paid on much lower volumes as a result of being closed in the lockdown period. As a consequence of that, we saw a lower gross profit and indeed, an impact on quarter 2 margins. I'm pleased to say, underlying new car margins have actually been strong. The real news here though, is just with the strength of used cars and service, albeit there's some help here from acquisitions, which we've undertaken. You can see a 34% increase in used car gross profit in quarter 2 and an 11% increase in aftersales gross profit, a tremendous performance. Used cars is all about the market dynamics, which I'm going to go through in more detail, but it was aided by strong marketing campaigns, which meant we felt we did maximize in terms of used cars. And service is a story of true pent-up demand, we believe. So in terms of revenue and margin analysis. In terms of revenues, revenues in new cars, excluded as new retail, actually rose from 24% of revenue to 27% of revenue. Looking at the quarter 2 period, the 3 months to August, fleet was actually down. And this is due to an inherent weakness we've seen in the fleet departments around cars, where daily rental demand has been low, corporate contract hire has been low, which we're putting down to confusion around homeworking and where that corporate contract, how market is going to go going forward. In terms of retail, volumes rose, we lost normal seasonality patterns, in essence, for our sector. What you would assume -- I've been in the sector 19.5 years, to happen in a month didn't happen. It was completely put out by the lockdown. So we saw new vehicles much stronger actually in volume terms than normal, but also rising selling prices as well across the board. If you look at gross profit, used cars made up 37% of quarter 2 gross profit as opposed to last year's 31%. We saw higher margins. We took a call on supply in mid-May, and we felt it would be constrained and then had a deliberate strategy of rising our prices in order to take cognizance of that. We didn't think we'd be able to grow volume because of the lack of supply. That worked for us. In terms of service, we saw margins over 50% for the first time. Inherent margins in the service department were strong due to mix issues. But the other part of our sales business, part of actual repair were weaker for reasons I'll go into, which meant actually, we had more of the higher-margin service work compared to parts and accident repair. New car margins, as you can see, actually came off, and that's due to this effect of lower bonuses accounting for in June relating to the April to June period. Manufacturers did their best to support us, but in essence, we sold less cars. So let's take aftersales first. You'd be familiar with these slides if you've studied the group before. A strong growth in like-for-like gross profit in the service departments. Like-for-like revenue up 9.7%, gross profit up 12.4%. We saw good demand and we saw good margin growth. We definitely saw a pent-up demand and continue to see pent-up demand, and this will continue for a number of months as the MOT deferrals from the lockdown come in as a distinct lack of capacity in service at present. We saw more retail work coming into the workshops. Retail overall, was up 24.7%. And within retail, that actually includes corporate work coming in from fleets. And fleet servicing came much slower. It had got back to normal levels by August, but is at a lower margin, so we're in a real sweet spot for the first 2 months post lockdown, which clearly aided margin growth. Warranty work, which has been growing significantly over the last few years, actually fell 20.8%. And again, that tends to be lower margin, so enriched our margins. We actually felt we came out faster than the rest of the sector in terms of aftersales. We had 98 departments open during the lockdown, which meant we could build quickly. And managing that technician capacity in, and bookings in was a bit of a chicken-and-egg situation, but I think we actually managed it well. You can see on the parts and accident repair side of the business declines -- significant declines. Revenue is down 9.4%. Three things really to talk about here. One is, as we flagged previously and Karen mentioned, we pulled out a box or trade parts business as they reorganized and put them into PSA hubs. We declined to do a hub. So that has actually reduced our turnover, but we've taken cost out to get that business rightsized. We -- as similar to new cars, we actually had lower parts bonuses in June, for the calendar quarter to June. Clearly, we weren't selling many parts in April and May, and that impacted gross profit. And overall, my car, for example, was sat on the drive unmoved for 8 weeks, during the lockdown, which mean there's less cars on the road. You have less accidents. The weather was also excellent, which is also bad news for accident repair. So we saw less demand, a fraction at repair itself, but also parts rose from our trade operations into accident repair. We've also seen the largest provider of accident repair services in the U.K. going to administration, Nationwide Accident Repair, and I think that shows the pressure that there's been on that segment. Overall, our core gross profit in aftersales rose GBP 1.2 million in quarter 2 on the back of a very strong service performance. Slide 16 shows new vehicle departments in all its aspects. So new retail, new motability, fleet and agency car and also vans -- new van demand. And quite complex trends really. If you see gross margins and profit down in new car and fleet, that's due to this bonus, missing the high-volume bonuses that we get in June. That's quite clear. Underlying margins, as I say, have been excellent. New retail demand was slower during the lockdown than used cars and came back slower, but came back with a real vengeance mid-June through to July, in particular. We have a good supply of new cars in the lockdown. As Karen said, we have really high levels of adopted stock. And so the industry wasn't short of cars. But obviously, the impact of European car factories closing for a couple of months and then onto the social distancing has meant tight -- the supply has got tighter over time and remains tight. That is really quite clear. You can see in new retail, our growth like-for-like was 3.4%. The market was down 2.2%. I think we did a perform and do well, but we have to be cognizant that the market includes tactical registrations, preregistrations and some degree of push historically. And in a supply-constrained situation and certainly, with fleet demand lower, we've definitely seen the difference between SMMT registrations and our sales activity. Certainly, in the retail segment, perhaps been quite clear. Motability is an important channel of new cars for us. Motability have actually closed the doors on the scheme, April and May; reopened, the 1st of June. There's been a significant pent-up demand there without any doubt, and we outperformed the market with our like-for-like of 11.7%, market up 9.4%. The real area of weakness has been in fleet car. Demand, actually, down -- our like-for-like is down 29.2%. The corporate company car market is, I believe, in some degree of dislocation, partly due to emissions confusion, but also due to the fact people are working from home and it may be questioning whether they're going to have a company car. And I think fleets are doing reviews of that. The data rental segment for obvious reasons with the lack of airports and travel and tourism and business travel has been very low and clearly quite constrained. And overall, manufacturers have not been pushing high volumes into the fleet segment. They've been trying to keep the higher-margin retail business going. So I think we've seen quite a movement actually in fleet cars, which at some point will reverse. The van market, however, has been very different. You can see the market actually fell 13.2%, but the group had an excellent performance with vans up 0.2%, significantly outperforming the market. We've seen strong demand from couriers, obviously, as more and more people get deliveries to their home. We've seen competitor actions where maybe on the back of working capital constraints, they've been removing themselves from jobs to the fleet market, and we've been specifically going out there and trying to take it. And our Vans Direct business, which we bought nearly 2 years ago has proved an excellent business, made profits throughout the lock down and it's been growing quite steadily. It's fully integrated into the group now. And the business is based in South Wales, but all the inquiries now get handled initially via our contact centers in Gateshead, and that's proved to -- a good win in terms of conversion. Overall, therefore, our gross profit in the core is down GBP 3.6 million in new retail and motability, as you can see on the profit bridge. And fleet and commercial is down GBP 1.2 million, so we saw reduced profitability in -- from new vehicles. However, used vehicles is a completely different story. We have seen a significant growth in used vehicle profitability, as you can see on the profit bridge, and this has been a major driver of the group's profit. It's quite a busy slide, but there's some really important points here. The period last year for Q2 was a period, as you can see on the bottom left graph, where values declined quite considerably, in excess of 2%, among the industry was struggling to cope with that price decline and prices were weak. And I actually think we did well last year getting our stock turn up and not getting swept into that margin erosion around prices. But clearly, that's the backdrop. This year is a complete reverse. We've had high demand. We have seen volumes up 1.9%, which we're pleased with, because last year, we were actually moving stock very quickly to overcome the price fall. So to actually keep volumes up against that is really good. We feel we have superbly executed marketing strategies. We centralized our marketing approach during the lockdown. We've got a plan on marketing all the way out to the end of the financial year in terms of exactly what adverts we're running across the group. We put our prices up in mid-May. It was an important call that our operational team made. We believed that we would see an elastic demand/supply curve and that putting prices up wouldn't affect volume too much. We couldn't necessarily replace the cars we were selling, so we needed to make the maximum margin could. And that worked for us. And in terms of why demand is high, there are lack of opportunities to spend money in anything else. A lot of holidays has been taken in the U.K. And people wanted bigger cars or more reliable cars to go. And I also think the message that Boris said on a particularly interesting communication to the nation, that avoid public transport, use your private car or words to that effect was the greatest advert that our industry has had for many a long year and certainly made one Chief Executive happy. People are nervous of public transport. I went past a bus this morning that said full due to social distancing so it's potentially unreliable, and who wants to wear masks for long periods if you can sit in your car, listening to your own music. And I think the public get that, if I'm honest. So our margins increased substantially. You can see there, the pricing stability on the bottom left, the green line, has been rock solid. In fact, if anything, prices have been going up. Our gross profit generation has been up year-on-year, particularly in July. We had an exceptionally strong July on the back of reopening the English dealerships and running a very successful TV marketing campaign, so we're very, very pleased with that. We've also been reporting for a number of years in the premium -- some certain premium manufacturers. There's been a lot of pressure on nearly new products due to tactical registrations and preregistrations, which was having a negative effect in terms of used car margins. That lack of tactical caution preregistration has meant we've now got clean used car businesses with a proper age profile. And our margin has gone back to excellent levels and has had a big impact in terms of profitability. As I say, where do I see used car prices going in quarter 4? Unless we see a significant down in demand above seasonal normality, I can see stability and relatively good levels of normal seasonality in terms of used car values. I don't see anything else. So if we turn away from quarter 2 into September, September was the most profitable month in the history of the group. Now we've got more dealerships. We've certainly aided that and the acquisitions certainly turned up and delivered significant profitability from the ones we did earlier on in the year. But still, it was a very, very solid performance with definite tailwinds from the general economic position that the industry finds itself in. We grew strong revenue growth. Revenues up 13.9% year-on-year, you can see strong service growth there, aided by an extra working day. But all channels grew apart from new fleet for the reasons that I flagged. The SMMT numbers are on there. You can clearly see new retail volumes, like-for-like up 6.3%. Actually, total group up 14.5%, which I'm very pleased with, but the like-for-like growth compares to a decline in terms of the SMMT. And this is because the SMMT numbers for retail include a heavy push in the last 3 days of thousands and thousands of cars, which then go into dealer stocks and aren't sold to consumers until the following quarter. So there's been some interesting -- I think how that plays out because, actually, therefore, there's been less preregistration at the end of September, you'd think October would also see quite a significant increase in sales for dealers relative to -- relatively to the market. And I actually also think, due to supply constraints, there's been a move of registrations from September into October. So I think October should be relatively strong. It's good to outperform the market as measured there. Motability continues to be significantly on the market. And that's pure -- there's obviously no preregistration or anything in the motability market, which obviously, has outperformed there. The real surprise, I guess, to many, will be that the van market was significantly up year-on-year, 26% up in terms of U.K. registrations. But last year was very peculiar because of the implementation of WLTP for vans at the 31st of August, which crucified van registrations in September because people registered them in August. Like-for-like, we were up 53.3%. So all the hard work that we've done to gain share in the van market has come to fruition, and we're clearly very pleased with that, but it is obviously flattered by the WLTP effect. On to used cars, 8.9% increase in like-for-like volumes, we are absolutely delighted with some really strong continued demand for used cars. And because we managed to do a lot of new car business, we've got those used parts exchanges in, the supply was a little bit better in the month, and therefore, we managed to grow. So we were very pleased to deliver that result. So looking at the outlook and summary, the final slide on Slide 19. The group has emerged strongly from lockdown. I think the industry has emerged strongly from lockdown, but I would hope to think we have outperformed. We have increasing confidence of a strong financial outcome for the year as a whole. And clearly, we've got more visibility on that, but there are clearly a lot of uncertainties around the economy and consumer confidence, the impact of lockdowns and virus restrictions. And also, obviously, people forget about this, Brexit and what -- is there a trade deal? Is there not a trade deal? I guess you could say that we've had a lots of things to handle this year, and this is just another one to add to the list. But the Board is confident. We think we've got a great business with highly motivated, energized colleagues who are bolting to what we're trying to do. We've got a strong culture, increasingly consistent culture. And we've got some great technologies. Our software teams have done an exceptional job. All the developments that we're putting in place are in-house developed through our own robotics experts or software developers. And I think that gives us confidence that we can be ahead of the curve in regards to the changes that customers will demand of us. So overall, I think we are confident and excited actually, about the future in terms of what can be achieved with this group in the next few months and years. The balance sheet gives us great resilience and ability to expand the management team. I would like to thank them and all the colleagues in the group for doing such sterling work in quite difficult times. Actually, at times, it was not a pleasant experience to furlough 5,000 people, but it was much more pleasant to bring them back. So the Board is, therefore, confident and I'd just like to thank you for your time. And hopefully, we have covered the salient points. Thank you.